Answer to Question #134232 in Other for sandeep

Question

Extra Ltd is a long standing public company with a share capital consisting of fully paid ordinary shares. In 2018, the company financed its expansion by using external debit funds. Working capital is financed by a flexible bank overdraft.

Use the following ratios to prepare a report which comments on the strengths and/or weaknesses of the business.

Ratio 2017 2018 2019
Current Ratio 1.2:1 0.9:1 0.8:1
Liquid Ratio 1:1 1.2:1 1.4:1
Collection period (days) 30 34 40
Stock turnover (times) 6 5 4
Asset turnover (times) 0.8% 0.86 0.9
Gross profit margin 40% 40% 40%
Net profit margin 10% 8% 5%
Interest coverage (times) 20 10 5
Long term debt to total assets 30% 40% 42%
Net asset backing per share $3.00 $3.80 $3.90
Market price of shares $2.25 $2.50 $2.10
Payout ratio 20% 20% 20%
Dividends per share $0.50 $0.40 $0.30

Answer 1

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